Traditionally viewed as the “back yard” of Israel’s urban landscape, ethnically mixed towns have been predominantly studied in light of the marginality paradigm, which neglects to recognize these spaces as social places, namely as life worlds in and of themselves. Drawing on archival and ethnographic fieldwork in Jaffa, we propose a relational anthropological approach to the problématique of marginality and pluralism in Jewish-Arab cities. These are seen not as unidimensional sites of hyper-segregation but rather as spaces of creative marginality, which paradoxically challenge the nationalist spatial hegemony (both Palestinian and Zionist). Examining the everyday enactment of alterity we show how marginality and exclusion become precisely the driving force behind one of Israel’s most creative back stages.